Malpass: European Crisis Will Hurt US Stocks

Encima Global President David Malpass says that Europe's problems can cause big problems for U.S. stocks.

"It's a global economy," Malpass tells mscnbc.msn.com, “and when European consumers cut back, many of the products they stop buying are made in the U.S.

"If Europe falls into recession, we would be selling less Coca-Cola and McDonald's over there,” says Malpass. “A big chunk of our economy is tied directly into the European economy."

Nervous investors seeking higher interest rates on bonds issued by troubled European countries led to painful budget cuts that have weakened some European economies and raised fears that one or more might default.

Moreover, tanking figures for gross domestic product (GSP) have made many European consumers understandably a good bit more worried: Overall, Eurozone gross domestic product rose just 0.2 percent in the second quarter. Germany, the Eurozone’s largest economy grew at only a 0.1 percent pace; France's GDP was flat.

"It will take dramatic action in Europe to break the downward spiral," said Malpass. "On its present course, the risks have increased substantially of major European bank failures or nationalization, a European recession and a breakdown of the euro."

According to the Office of The United States Trade Representative, the U.S. economic relationship with the European Union (EU) is the largest and most complex in the world, generating trade and investment flows of about $2.7 billion a day and supporting 14 million jobs.